Whether you are in consumer goods, logistics, automotive, manufacturing or any other industry – your business will have a unique journey for GST implementation.
The GST Bill
The way India does business will change forever after the GST bill is rolled out in April 2017. GST will lead to increased simplification of the tax levy and administration, and increased transparency, which will enable wide compliance and ultimately will unify the country as a single market.
India’s GST implementation is
expected to bring the unorganized sector under a uniform tax base and improve growth opportunities for the organized sector.
In the long run, this is expected to unburden not only the common man but SMEs as well.
The country can expect to have three types of GST namely Central GST, State GST and integrated GST within the GST credit chain. Furthermore an additional 1% origin tax on supply of inter-state goods outside the GST credit chain.
Implementation of GST will lead to 3-5 billion invoice uploads every month. SAP estimates that at least 40% of these will pass through a SAP-enabled system.
GST will be transformational and the implication on the industry extends well beyond Tax. It will affect every part of business right from Financial Reporting, Tax Accounting, Supply Chain, technology enablement and contracts redesign. Training people within the company and its business eco-system will be fundamental for the readiness for the new regime.
This gives SAP a huge responsibility to not just help businesses get compliant with the new law, but also ensure that businesses benefit from the GST vision.
Utilization in GST
Utilization undergoes a drastic change in the GST regime. The philosophy orients towards a ‘system of proof’ : with regards to input tax credit utilization, currently we are self-assessing the credit based on our ERP system and taking the input tax credit as and when we run utilization programs. Now this would be changing drastically in GST. GSTN (Goods and Service Tax Network) would maintain separate ledgers for every tax payer like input tax ledgers, cash ledgers and tax payable ledgers. So our systems should reconcile the data with the data present in GSTN system and we cannot just go ahead and take the credit as per our system, as there could be discrepancies in the data which has been submitted from your suppliers and based on what has been approved / rejected by GSTN. So now we need to reconcile the input data provided by your suppliers and may require corrections by contacting respective parties or by correcting the data in your own SAP system
Master data Changes
Changes to Master data and the fields to be used in GST for identification and rate determination. GST reg. no. to be captured for each Registered Customer and Vendor, From the Purchasing side SAP has identified Tax indicator field in Material master to identify if material falls under GST or not, from Sales side identified to use Tax classification field to identify if the material falls under GST. For vendor master SAP will be creating a new field in CIN details tab to identify if vendor is part of GST and similarly will be using existing tax classification field to identify if customer in under GST
Pricing configurations under GST
A detailed overview of the new configurations and changes to the existing setup in pricing elements. As said the customer should have maintained tax classification indicator and when we have to determine the price at sales there are 2 parts one is at material master and the next is service master. When it comes to the service master the access sequence should have the activity number which is the same as service master number and it should also have tax classification indicator for service and customer. Similarly for material pricing in sales it should have tax classification indicator for material and customer
Co-existence of Excise with GST
The impact of the introduction of GST on the existing system setup are: We need not deactivate the excise functionalities, as excise will co-exists with GST (For some specific materials like tobacco, alcohol and petrol). So this means these materials would continue to attractive the existing excise taxes even after GST. So in order to achieve this, SAP is enhancing the standard tax and pricing procedures with new condition type so that they continue to have excise rates and other materials will have GST rates. These new condition types will have their own access sequence to have effective determination of tax rates. Being said this the existing CIN configurations would continue to remain in your system and the customers who do not deal with NON GST materials can build there system without CIN.
Pre-requisites for GST
The prerequisites to ensure you are GST ready is the minimum SAP level on which you have to be for respective EHP release are provided under Note: 1175384 and the most important prerequisite is to have your default tax procedure on SAP as TAXINN as GST setup would no more support legacy TAXINJ. The complete details along with list of FAQ’s are provided under Note: 2252781
- Minimum support pack that the customer should be on is provided in the following note – https://launchpad.support.sap.com/#/notes/1175384
- TAXINN is the default tax procedure. Please refer to the following FAQ note related to the migration of the tax procedure – https://launchpad.support.sap.com/#/notes/2252781